Anglo American and technology group Arm Holdings have attracted significant shareholder dissent

Australia’s prime minister Tony Abbott on Friday backed the case for a parliamentary inquiry into the iron ore market, heaping more pressure on large miners including BHP Billiton and Rio Tinto to defend their supply strategy.

Iron ore has become one of the most important globally traded commodities but a steep fall in its benchmark price over the past year has caused financial pain for some miners while slashing tax revenues and leading to job cuts in Australia, the largest producer country.

Andrew Forrest, the billionaire founder of Fortescue Metals Group, the country’s third-largest iron ore miner by output, has directed an increasingly vocal campaign against rivals Rio and BHP, accusing them of wrecking the market through oversupply rather than acting in an economically rational way.

Mr Abbott did not back Mr Forrest’s stance but said he was conscious of the claims he was making.

“We do need to know the facts here,” Mr Abbott said during a radio interview on Friday. “What we don’t want to see is predator behaviour by any companies . . . we don’t want to see irrational behaviour.”

Mr Abbott added he would not “demonise” Rio and BHP, the country’s largest corporate taxpayers. “I want them to continue paying a lot of tax here in Australia,” he said.

One attempt to set up an inquiry in the Australian parliament’s upper house, by Nick Xenophon, an independent senator, was postponed this week.

Rio and BHP have maintained that they are acting rationally in trying to maximise the amount of iron ore they can produce.

After pushing through big cost reductions, they are still able to make substantial margins even at an iron ore price of about $50 to $60 per tonne, as it is now, compared with about $140/t at the start of last year. Both companies have operating costs below $20/t.

Their view is that FMG — which has higher operating costs and lower-quality iron ore — has been one of the fastest-growing iron ore miners, and as such a culprit in any supply imbalance.

Sam Walsh, Rio’s chief executive said this week that high iron ore prices had “brought in marginal producers, often based on overly optimistic assumptions and aggressive business models”.

Rio had invested $28bn in iron ore production over the past decade and wanted “to see the return that flows from that”, he added.

Andrew Mackenzie, BHP’s chief executive, said this week that any attempt to curtail low-cost output would “deprive the market of its power to deliver the most efficient supply”.

Brendan Pearson, chief executive of the Mineral Council of Australia, said Rio and BHP’s shares of the global iron ore market had not grown in a decade.

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